tv Key Capitol Hill Hearings CSPAN June 23, 2015 11:00pm-1:01am EDT
in its considered judgment to set ambitious but responsible levels. >> i that i think. i know my time has expired. i would argue that we are caught in a very vicious cycle with the producers not knowing what that volume will be. so we've actually delayed production and research and the furthering of those types of fuels. so without the standards being set, we don't know where to go. so i just continue to say we need reliable energy sources for all of our consumers and we would like them to make that choice but thank you very much, mr. chair. >> thank you. >> thank you, mr. chairman. thank you for being here. i have a series of questions that will follow up on senator ernst's questions. what you hear about corn production values and from the department of agriculture are different. there is a lot of discussion in your quad republicanal review about coordination. so i'll come back to that in
just a minute. but i wanted to associate myself with the previous questions, as well. has the epa use studies or metrics to modern how the proposal rules will affect transportation prices? >> the way that the rule or program affects the prices is complicated. we did not attempt to estimate impacts on transportation fuel prices. >> no studies or models were used? >> we certainly looked at all of those, but we ourselves were not trying to estimate the impact. >> so would it be possible for us to get a list of those studies and the models that you consulted? >> sure. >> did you conduct models on how it would affect international trade and if you looked at changes in trade flows and biofuels between the united states and brazil?
>> those are issues that many people look into and we pay attention to work others do but we didn't do that ourselves. >> when you're evaluating the proposed rule, when you're deciding what you're going to promulgate, are those studies and what you consult something we could have access to? >> sure. anything that we looked at you certainly can look at yourself. >> great. thank you. in your testimony -- and this is picking up with the senator, you say the epa will continue to engage stakeholders and work in consultation with usda and the d.o.e. in april, the department of education released -- i'm sorry energy released their review and stressed d.o.e. and d.o.d. would be continuing research and demonstration activities to develop drop-in biofuels,
particularly for use in aviation and large vehicles. in addition, the reports states the department of energy would be providing technical support to the states, community and private entities. the usda crop projection reports on corn that state that the amount ooh corn used in calendar year 2014 is estimated to be 14.2 billion bushels up well from the 2013 estimate and average yields for the u.s. are estimated to be at a record high of 171 bushels an acre. i think what this means is the usda is saying there's plenty of corn and the department of energy is saying we need more infrastructure and more research. i think when you listen to corn growers in my state, they're skeptical about your promises of the close consultation across the department and also with different geographies. and they actually wonder if you all are skeptical of corn.
so i wonder if you see their skepticism and if you can explain to them how it's believable that you're listening to these other agencies. >> indeed we do. i can assure you that we work closely with the u.s. and d.o.e. i can assure you we do. i have been involved with staff and leaders from those agencies working on this and other issues and there is a commitment across the administration to work to implement the rfs and promote the development and use of renewable fuels. so it is hard to convince people who might have a different view but i think that our proposal reflects the fact that we consult with those agencies and we are not agriculture economist and don't try to be. that is their job to do so. we must work with them and we do. >> it just feels to a lot of
people who are trying to make production decisions that it's hard to reconcile the different agencies' views of the future of the corn crop. i am a cosponsor of s-1239 that is a bill that expands waivers of the vapor pressure limitations that otherwise make it harder for the e-15 to be used in the summer driving season. i have some questions for you related to the problem that that tries to solve. some of these may end up being technical enough that we'll need to do it for the record. on these. the state of nebraska is able to provide us with a breakdown of the number of registered vehicles by fuel source including automobiles capable of using flex fuel and e-10 in our state of nebraska. in light of your concerns over the refueling and vehicle infrastructure issues in the u.s. would you be able to provide an epa estimate of how many vehicles in the total u.s. fleet are capable of supporting fuel above e-15? and in particular how many can use flex fuel and would you be able to elaborate more on the
breakdown by fleet and the amount of vehicles that could support each category of fuel? >> we do have numbers to answer those questions. i don't have them with me but be happy to provide them. >> great. we'll follow up today with a letter. >> great. >> senator peters. >> thank you, mr. chairman and thank you ms. mccabe for the epa's hard work and i work forward to working with you in the months and years ahead as we continue to work on this. as a senator from michigan i am always looking for ways to diversify the u.s. vehicle fuel supply and making our nation more energy independent, improving our environment. the rfs i believe has been a proven program that is driving forward alternative fuels and economic development. it's creating new clean energy jobs and at the same time strengthening our agricultural markets. while i appreciate the effort of the epa to set targets and trying to balance achievable
standard, i believe that these targets that you have don't reflect congress's intended goals for the rfs. when coming passed the rfs the intent was to set ambitious targets to spur innovation and invest in infrastructure to bring the biofuels to market. in order to accomplish these goals, i believe we have to stay the course and we have to keep the rfs intact. epa's latest proposal is an improvement, certainly over the 2013 proposal, but the proposed volume requirements for the next few years i believe, do have consequences for our economy for our energy security, and for the environment. in addition, the epa's delays in rule making over the past few years have chilled -- and i believe this is a big concern -- have chilled necessary advancements and investment in biofuels just as they reached commercial development. the latest proposal says lack of supply is a reason to reduce volumes. it wasn't the congressional intent to allow epa to cite the availability for supply as
blending with regard to its waiver authority. i joined a letter signed by 37 senators stating the condition being cited falls outside of what we think is a clearly defined waiver authority. in relation to the infrastructure investment, i believe it is clear that the proposal will depress fuel prices and eliminate incentives that exist today for infrastructure investment. this is troubling, given the fact that before the rule, infrastructure investment was rising rapidly and now it has stalled as a result of some of these delays. what is your plan to get infrastructure investment made if this proposed rules is finalized without any changes? >> we think there are a number of things that will happen. you yourself cited and many others the certainty of having the volumes out there is critical for people to know what is coming. i think this proposal signals an intent of the administration and the epa to steadily grow volumes over time and that certainty is important.
the usda, which was mentioned a minute ago, is committed to looking to enhance and improve infrastructure. it recently announced a program to help do that with grant funds, to help build infrastructure. and we think that the combination of those efforts things that we are doing in order to stream line the pathway approval process so that we can get these new and innovative pathways approved and into the market will also help. and that as you put those things together, certainty from the regulatory side, some support from usda and others across the administration and people realizing that more fuel more choice, will attract consumers to want these fuels that those things will help us move in the right direction and continue to make real progress.
>> so as you mentioned, one of the importance of certainty, and before we had certainty, the impact it has. the biotechnology industry showed $13.7 million in investment was lost since the year of the proposal. does that sound accurate? isn't at a big concern? >> i really couldn't speak to that number, senator. but we absolutely are concerned about the lack of certainty and what it has created. that is why we are getting this program back on schedule. >> do you see the amount of fuels blended increasing in the future years? if so, how do you see that playing out past 2014? >> i do see it continuing to grow. i think senator ernst acknowledged before the rfs that there was very little of this fuel in the market. there's now much more than there was. and we see growth. we see pathways coming in.
i have many conversations with stakeholders from across the biofuels industry who are very optimistic about their ability to supply fuels to the marketplace. as i noted before, this law is calling for something of a significant transformation in the way transportation fuel is provided and these volumes we believe will continue to encourage and promote and drive those changes. >> were greenhouse gas emissions considered as the agency prepared your rule in 2014? if so, what were the results? >> greenhouse gas emissions are fundamental to the purpose of the rfs. when we set up the program in our 2010 rule we did an evaluation of greenhouse gases. so the annual fuel volumes, we don't do an independent relook at greenhouse gas emissions. >> okay. i look forward to continuing to work with you. this is a critical industry and
in my state as well as the other states here a critical part of energy independence in our country and with agricultural in particular. we have a special connection given the fact that i represent michigan which we like to believe is the center of the auto industry, as well. so i look forward to working with you. >> thank you. >> ms. mccabe, i appreciate you being here. let me walk through history we walked through together. 2010, final rule for the rfs was four months late. in 2011, it was a good year. it was only two weeks later. 2012, one and a half months late. 2013, nine months late. 2014, 18 months late and counting and 2015 six months late and counting. the challenge is once we get
into '1 6/, '17, and '18, how does this get better and how does rfs get on schedule to be ready by november or has congress put a requirement on epa that they cannot fulfill? is there something in the structure that year after year they cannot meet this requirement? >> senator, i think that is a very fair question. epa does not like missing deadlines either. i think that a couple things happened as we talked about last time when i visited with you that made 2014 particularly challenging and led to these significant delays. and i am an optimistic person. my job is to implement this program and meet our statutory obligations in terms of time frame. so i'm confident that we'll do that. and i'm confident for a couple of reasons. one is through this rule making this year, we will get ourselves back on track. we have -- 2014 was a
significant year because of the impact of the ethanol, e-10 blend wall, which was a significant issue that people engaged in very, very robustly. and that time was going to come at some point in the implementation of the rfs. and last year was the year that it came. we learned a lot from that process and from all the conversations that we had with people. and our proposal our current proposal reflects a very different appropriate to implementing the required volumes in the statute, evaluating those in light of the fact that we are now at and beyond the e-10 blend wall. and the approach we have taken now, which as it lays out three years, can show the epa sinking over that three year period of time is reflective of the fact that we, of course have finalized the rule and want to make sure we understand
everybody's views on it, but if we were to continue with that approach, we would have an approach we firmly believe would enable us to issue the annual volume standards in a timely way. our staff of technical folks working on the rfs program are working on it all of the time. so it's not that we -- >> i don't think there's anyone that believes you're not working on it. it's a matter of the method and the time. let's say '14, '15, and '16 are finalized november 30th. so we have that out. then come november of 2016, now we're in reset time. i would assume you would agree there's no chance we're going to hit the targets for 2017 based on sought of what is required. so that will require reset. we're not going to be 50% unless there's a tremendous loss that comes on board. with the assumption, as well
the way the statute is written, corn-based ethanol continues to decrease as required in statute. and say the loss continues to increase byrequired by sought. if there is a clear aspect of the law that is clear in the law. that is also not possible based production. so you're in a very odd quandary come november of 2016 trooil trying to promulgate 2017. it looks like he will announce 2016 on time but 2017 is coming. how do we avoid that? >> a couple things in response to that. >> you mentioned the reset requirements and the statute does lay out circumstances under which we consider a reset which is a significant undertaking because it is for multiple years into the future. >> but would you agree on the optic, we're going to decrease that number by 50%? >> yes. i would agree. and depending on how these volumes turn out, we may hit the
reset trigger for the other volumes, as well. we actually think that it makes a lot of sense to focus a reset on all volumes at one time. and it just will provide a lot more certainty to everybody to do that. we also recognize that we have an ongoing obligation to set the annual volume. so we will be looking to plan our work so that we can accommodate setting annual volumes while also proceeding to consider resetting, if we trigger the reset for the volume. >> so let's talk about how you get comment and conversation going on a reset. because setting the proposed volumes, that is one methodology that there's some conversation on right now. and then you'll finalize that rule by november 30th of this year. then we've got to do both the reset and volumes next year. will that be two different processes? will there be a comment period base on the reset and a comment
period based on the annual? are they combined? because i assume you're creating a method on how to do reset on how that has to be done again 2018 or 2019 to re-evaluate from there. so two different processor one process? >> i think it's likely that a reset process would take longer than the one year required for the annual volume. so while this is not firmly decided, my expectation is that it would likely be two processes. and each would have comment opportunities and multiple opportunities for stakeholder input. we would do much information gathering as part of both processes. >> would the recess process start before 2016 begins if that takes more than a year? obviously, you have to promulgate that annual amount by 2016. if the reset, which i agree will take longer, because there are a lot of different players interested and there is a lot of conversation on corn hp based ethanol but it decreases and the other increases and we have to
be able to figure out how it works when celuosic doesn't exist in near the quantities needed. as the reset comes through, when do you anticipate that is going to get out for comment and will start? >> our highest priority is right now to make sure we get the 2014, '15 and '16 volumes out. that doesn't mean we don't have our staff already thinking about the things they need to think about for the reset. so i don't have a schedule for you on that reset rule making. but i can assure you that the minute 2016 is done, we will be turning our full attention to the 2017 rule and to the reset. >> this is what i would like to do. there has to be around the water cooler conversation about how the reset fits into this and the timing. you are very good at planning on some of these things and trying to backup if we are going to have it ready by year we have
to have -- i mean, you can plan all this stuff out. that means we have to have a draft proposal here and proposed rule making here. we need to know that agenda. so if i give you a month and time period, can you come back to us with a reset time frame, at least on what the major calendar events will be on a reset? is there a a reasonable amount of time to give us the calendar? they're going to tell us what the reset is but when the major decision points will be made and when comments will come out. >> i'd be happy to go back and talk with folks about how much clarity we can give you on that in a near time frame, senator. >> if we can do that in a month and get the schedule that would be helpful to get a level of predictability. senator heitkamp. >> thank you, mr. chairman. first off, i don't think we know what volumes of cellotic ethanol
can be produced because we have not given the market certainty and we stalled out investment. i don't expect somehow there won't be enough supply to meet the standards. let's not presuppose or judge that discussion in terms of what is going to happen in the marketplace. i would rather get back to the rule we are talking about and debating. i think i mentioned it in my opening comments and senator ernst followed and walking thew epa's legal authority to deviate from the statutory mandates. when you said it was inadequate domestic supply, i think most ethanol producers would tell you to them, domestic supply means the supply of ethanol and there's plenty. certainly of biodooel diesel in the marketplace. in fact, we stalled biodiesel. we shut down biodiesel
facilities because we didn't have enough access to the market. so to me, inadequate domestic supply means what it means to anybody who would read it, which is the supply of the product, the fuel. when you say you can use that language to basically justify a refueling infrastructure waiver, did you look at the legislative history in 2005 when the house language pretty clearly addressed this by saying based on the determination that there's an inadequate domestic waivers, based on the determination that there's an inadequate domestic supply or distribution capacity to meet the requirement, what does it tell you if amended out of that is distribution capacity and all you have is domestic supply? what would that ip form you in terms of the legislative history? >> well, senator, what i would need to look at is the language
in the statute. i -- what it tells me -- >> you also -- if you're going to, you know, i think broadly read the language inadequate domestic supply and read it in what i would consider a fairley twisted way, you should look to the legislative history. that's what lawyers do. that's what judges do. they look what was the intent of congress? and when congress repealed the language or rejected the language in their final analysis, distribution capacity, what does that mean? what does that rejection mean? >> to me, it means that there was discussion and there was interest in this issue specifically from at least some members and that that language did not end up in the statute. >> and what does it mean for lawyers when there's language that is proposed in one spot, you go to conference and you eliminate or take out language? it means that is not the intent of congress to use that for waver. you cannot bootstrap the domestic supply language to deal
with refueling infrastructure. now, i'm not unsympathetic to the challenges you have in implementing this, but let's mott pretend legally that you have a very good legal argument here for the waiver that you've done. that's the frustration, i think is that the statute was designed to give the marketplace certainty. the statute was designed to basically set standards with very limited waiver requirements. epa took on themselves to expand the language and create a huge uncertainty which now you're saying, see there isn't a supply. well, there isn't a supply because we didn't have certainty for investment. and i'm not trying to beat up on you here. obviously, i've been a frequent flyer on this issue. you guys have numerous letters led by me and other members on this. and our frustration level has been extraordinarily high. because our producers koms come to us and say what about this is confusing? and let's, for a miven and not
with any kind of concession take corn-based ethanol and the blend wall. explain to me why there was a necessity to reduce mandate owes biofuels, biodiesel. >> we are not reducing mandates on biodiesel. the statute takes biodiesel mandates up to 1 billion -- 1 billion gallons. and then after that it's up to epa to increase the volumes. and we have, in fact, done that every year. and this proposal will, again, increase volumes for biodiesel above the minimum in the statute every year. >> but there is room within the statute for increase volume for biodiesel. i want to turn, with the time i have left, to talk about argentinian biofuels. and i think senator sas opened up this issue, as well.
earlier this year, epa announced approval for argentinian biodiesel as we have seen high volumes of imports of brazilian sugar cane ethanol. some of those, both of those have the potential to displace domestic production and especially undermine advanced biofuel volume mandates. i think it is really important that we understand a little bit better on how you consider imports in the equation when you are developing our deals. this is enormously frustrating. at a time when we're shutting down domestic supply of biodiesel, we're importing from argentina and that makes no sense to us. if, in fact, one of the reasons for this program is fuel/energy sufficiency for america. >> senator, the statue doesn't distinguish between domestic and imported fuel. it sets volumes of total fuel and that is not limited to domestically supplied fuel. so we pay attention to what is happening in the global markets.
there are many things that affect the amount of biofuel that could be imported to the united states. the united states also exports biofuels. we do pay attention to that. the amounts of biofuel coming in from foreign countries is relatively small. and i know there is a lot of discussion and debate and disagreement about that and i look forward -- i've encouraged peovi+z make sure they give us information about this during the comment period so that we can understand what everybody is seeing. but the bottom line is the statute doesn't distinguish between imported and domestic fuels. >> when you look at the numbers it is absurd. but i think a market in north dakota is sharing with canada and i understand the movement of biofuels. but i think when we're trying to
create a program that meets the -- whether you agree with it or not there's some dispute, you know there's so few things we disagree on but this happens to be one. but the program that the agency who has the responsibility for administering the program i think, has first and foremost always has to ask the question, what is the intend of congress and what do we know about the intent of congress? and i think that there has been a serious discussion not just in among colleagues here, but certainly within the industry and a serious concern that the intent of congress has not been followed here. and so i look forward to seeing the schedule. i imagine that we're going to have ongoing discussions, whether it's in the agriculture committee or wherever we have these discussions. this is an issue that isn't
going away anytime soon. as senator langford said, we're on reset and obviously trying to finish these years. but the worst thing we can do is not get this done timely. not -- and i don't mean just by sending out a draft rule. i mean by finalizing the rule so the marketplace has a certainty. we'll live to fight about whether that number is right but we cannot see this delay. it's incredibly disruptive. thank you, mr. chairman. >> this is the second round. we're going to go through some more conversation. we've been through this before in other settings. but this is going to be a more open dialogue. we'll have an opportunity to talk in the dias as with you on it. i would mention one thing to my colleagues on this, as far as congressional intend of the law, i will remind everyone especially when discussing corn-based ethanol if anything is clear in the law, it's clear that corn-based ethanol is a decreasing percentage of what is used in the days ahead. by 2022, if i remember
correctly, 44% of the ethanol in the united states is to be cullulosic based on the law. you have a big challenge that we are not producing near the amount. i do want to ask you about the cellulosic. epa chose to do a shift in definition somewhat. in 2013, if i recall correctly adding in cng and lng-based fuels in the cellulosic categories, as well. that bumped up the numbers and the capabilities but because of the cellulosic technology has not come through completely with switch grass and wood products and everything else that the compressed natural gas has been included in that category. was there a discussion in that shift? has that continued? does that continue the conversation that cng bleeds over into that cellulosic category even more? where does that definition go? >> i will need to get back to you on the specifics of the question.
but additional fuels are coming in to qualify as cell ewe lossic fuels. as those come in, we add them to -- >> talk us through those definitions, the new fuels in the cellulosic fuels. >> the biggest one that happened recently is bio gas which was recently approved and being produced in encouraging amounts. that is one. we also have various ones that are in process, penny crest is one and there are several others. i would be glad to provide you with details about what we've got in the pipeline and recently proposed and recently approved. >> the proposed volume that i see here, somewhere around 206 million gallons for 2017 i believe the mandate is somewhere around 4 billion gallons for that year. again, i come back to the -- i don't see any way possible that we're not going to be into significant reset time period as we approach this, especially that number on the cellulosic side of things and where that goes.
help me understand -- we talked about 2017 and reset. the methodology that you set for 2017, i would assume is going to bleed through to 2022 when this really is very open at that point wnl when the statute stops giving clarity and the epa has the ability to help determine amounts and all of these as you do with biodiesel right now. where does that go? is the example of biodiesel a good example to look at the path the epa considers for 2022? but as we look at the horizon here, 2022 is not that far away. what is the best model we can see for 2022? >> you are right. it is near and far and we have much to do in between here and there. in particular, assuming that all the triggers are met for reset, a relook at those volumes. i think that that will be an important place to think about that. i will say that it's our hope
that the approach that we've laid out in this proposal is one that we can rely on and that people can look to as a way of thinking about how to predict the volumes in the future years. no matter how the reset rule comes out in terms of changing the volumes in future years. >> so that is what i'm trying to get at. at everyone looks at it and capital investment. everyone is looking at a ten-year window in capital planning. what is going to happen 2022 is incredibly significant right now. because a facility doesn't come up to speed in a year, year and a half, two years. so that investment portfolio is incredibly important. when can we expect any kind of clarity from the epa on how this path is going to lead to 2022 1k3 what happened at that point? so give us a picture of the time frame that you hope to accomplish, knowing that there are billions of dollars of
investment that will be affected that have to have some advanced planning. >> so the standard itself set levels out to 2022. >> which we won't make any of them. >> and in our view and the view of many, those very standards are not ones that at least in the near term here we think are achievable. our job, as given by congress, is in the case that those volumes turned out to be problematic, to achieve to reset those (ñvolumes, that is the rule making in which we would have the public discussion, we would go through the information, and reset those volumes into the future, which then would provide that certainty into the future. the idea would be those would be the volumes that would be reasonable, responsible, achievable, meet the intent of congress in terms of growing these volumes so that we would not need to be talking about waivers in the future. >> let me provide some clarity here and i want others to be
able to join in this conversation. when you talk about the reset, you're talking about a reset of resetting a number or resetting a method of how you'll get to the number each time? >> my understanding is that our job is to reset the numbers. >> that's the annual. but i'm talking about the process of the reset. you're right. you're talking about two different processes, the process for setting the annual number, but in the process of how would they row set would that process on how we do reset, a process of how we reset the new nebs or resetting what the new numbers will be? >> so the statute gives us a number of factors to consider. my understanding is that that is what we will do we will undertake a rule making, looking at all of those factors to determine, then, what the numbers should be in that reset rule making. for years out into the future. >> okay. so -- >> and then the annual -- i'm sorry to interrupt you. >> that's all right. i was just going to say help us understand into the future how far in the future you expect to
go when you talk about the reset side of things. >> the statute goes through 2022. so i -- i'm not prepared to discuss today because we really haven't thought about that issue about what would be our authority or responsibility to go jan that. but we would be certainly looking at the statutory numbers. >> so the hope is to get some sort of reset number that goes out multiple years with the annual rule coming out on time in november. okay. and then i would just say fou again, it would be extremely important for all players involved that we start working towards certainty on 2022 in this because there's a tremendous amount of capital planning that's going on right now. either direction. >> thank you, center. the cellulosic has been an important move in iowa. we have biodiesel we have the ethanol. innovation and technology is advancing so rapidly, and we have those investors that really do want to join in but i think
senator hitekamp alluded to earlier, that the investors, when there is not a proposed -- or excuse me, a set volume out there, they are very hesitant to engage. so we have the two cellulosic plants that are up and moving, but we have, you know, a third set to come online. but for any state, any investors in any state to move forward they want to know that there is going to be a set volume and a demand for those products. so first we have to know what those volumes are in order to invest in this area. but we also need the infrastructure that is available. again, you've used that as an argument, why we need to lower, you know, some of the volumes. but i think one of the original intents of this was to incentivize getting some of that infrastructure into place. you'll see high volumes of biodiesel, ethanol are used throughout the midwest.
we have the plants. but we also have the infrastructure in place to support it. so many of the flex vehicle res being purchased on our coasts. and they don't have the type of infrastructure that we do in the midwest. so i would argue that we need to continue investing in this area, make sure that it is available. it is all about consumer choice, as well. so senator peters, i would like you to follow up a little bit about the greenhouse gases because i find it really ironic that this administration's public focus has been very much on clean environment and reducing greenhouse emissions and yet what you are proposing is actually a direction that will increase those carbon emissions by less utilization of these biofuels.
so maybe if you could comment a little bit about that and why you're not looking at greenhouse gas emissions. >> well we -- we do -- an underpinning of this program is reduction in greenhouse gas emissions. and as more and more biofuels get into the system especially advanced and cellulosic advanced biofuels, that's where the real reductions can be. as you know, in order to qualify as an advanced biofuel the greenhouse gas emissions need to be 50% less and for cellulosic 60% less. that's where we want the growth to be. and that has been happening, of course, volumes have been increasing steadily over time. not to the level that the statute called for, but they have been steadily increasing over time. our proposal here would take cellulosic biofuel from 33 million gallons in 2014 to 206 million gallons in 2016.
that's substantial increase. not as much as congress anticipated or hoped for. but from where we are now, that represents substantial growth. and so my point to senator peters was that in each individual annual volume rule, we don't reanalyze greenhouse gas emissions but we know the greenhouse gas reductions associated with these different categories and by growing the volumes by setting the targets to drive that growth in a responsible way, we will be seeing reductions in greenhouse gases because every gallon of gasoline that's replaced by cellulosic advanced biofuel is greenhouse gas emissions safe. >> i would just like to make a point about this. you talked about the proposed 2016 standards for cellulosic biofuels, those fuels with the lowest greenhouse gas emissions is more than 170 million
gallons. which is six times higher than the actual 2014 volumes. i know it's worth noting that it's likely because three commercial scale refineries came online in 2014. and one more is slated for the end of this year. those biorefineries were made possible by the investments that were created before the disruption with the rule. and i think when you look at -- since then guess how many proposals have been online? zero. because we've disrupted, through this rule and through the lack of timely rule making, we've disrupted the investment. we need to get back and i think no matter what our view of the wisdom of the rfs is if it is a law, we expect it to be administered in a way that congress intended. and i think senator langford is
on the right track when he says, tell us what the schedule is. tell us what the plan is. we can debate the wisdom of this law here in congress. that's our job. but it's your job to administer this the way congress intended. and that means doing it timely because i think we can meet these standards if the investors out there know that they will have access to the market. and so it is critically important that we not automatically assume that we're going to have a crisis of cellulosic biofuels or ethanol before we actually give certainty to the market and let the market produce. >> i would agree. and with the cellulosic, we have other advances coming with algae and investors are not looking at that in a way that we would have hoped they would if we would have had a set volume. so, again technology is advancing. it's a great renewable energy source taking basically waste products and producing a fuel
that's very low greenhouse gas emissions. so i would agree. i think we have a law in place. we need to understand what those volumes are. but we do need to move forward and follow the intent of congress. and i am at a point where i don't believe the epa is doing that. but i -- i hope that we can work through these issues. >> so let me do something that everyone at home is going to be shocked at. let me take the side of the epa. and say that the cellulosic was great theory and there are a lot of people experimenting with it. no one has been able to make it in a quantity that is affordable yet. and that has been the challenge. the largest manufacturer of cellulosic products just went bankrupt this past year. and it was a major hit in the cellulosic market because they were the leading industry but after a decade of trying to make this technology work, they couldn't make it work at a price
that people could afford. now, there's a lot of experimentation with this. it's not close to being market ready. and it's the challenge that the epa has is they have a mandate by 2022 to get to 44% of the ethanol that's used in the united states to be cellulosic and they -- no one can seem to crack the code to be able to actually make this in a way that's actually affordable. there are lots of folks experimenting with switch grass and wood and with stalks and algae and other great ideas. so far, that's not a technology that exists. in some ways, i feel like we're in the mode of the 1970s when president carter said they were starting all this research on solar power and by the year 2000 been 20% of america's power will be produced by solar power. it's now 2015 and we're not close to that number. a declaration and congress setting a number doesn't mean the tenl will be there. on the greenhouse side of things, the challenge you have is you're working on a rule in ground-based ozone and ethanol
increases ozone. in fact, epa's own study came out and said if we hit the rfs totals the ozone levels go up across america, in many areas significantly. the challenge we have right now is we're dealing with a balance of how do we get rfs totals and cafe standards decreasing the amounts we're using and hit new ozone standards? one of the three of those or two of the three of those do not work together at this point. how far off am i on that? >> there's a lot in there. but i think i would agree that there are a number of factors that have affected the development of cellulosic fuels. we work very closely with the producers and the developers. we spend a lot of time with them so that we can understand the challenges that they're facing. and we certainly hear, as you have described a desire for clear certainty in the market and ambitious targets which we think we are proposing here in
this rule, but we also hear about other challenges that those fuels have had in getting up and running. and i think everybody -- everybody wants those types of fuel toes be successfully produced and marketed and the more that that happens, the prices will come down and people will use them. but i would agree with you senator langford, that there are many factors there. >> and i want to ask about the e-85 as well. you have this assumption that e-85 is going to dramatically increase in usage even six months from now. i'm trying to figure out the sumgs that went into that. my understanding is that there are enough e-85 vehicles on the road right now to meet the e-85 requirements, but many of those individuals that have e-85 vehicles choose to purchase e-10. that's a consumer preference there. so i'm just trying to figure out how epa assumed that e-85 would suddenly jump when there are e-85 owners that choose not to use that prubt. >> well, you're correct that
there are lots of flex fuel vehicles on the road today that could use e-85. our information is that there are about 3,000 stations in the country that provide e-85. i live in indiana. we -- i see that at my gas station. but not everybody does. there are issues with the pricing. of it because the energy value of e-85 is different than the energy value of gasoline. i think people don't fully understand that. this is a long process, to change people's understanding of their choices on transportation fuel and prices need to move in directions that will encourage people to understand that that can be an economical choice for them. and i think that that is a multi year process and we have seen progress there. our proposal here is intended to be forward looking and
optimistic because we understand congress wanted this fuel to be driven in the market. >> but i'm trying to get at the actual method allege. is the assumption we're going to try to push a method here that people that1yv8 have flex vehicles will start using this product more? >> so we've looked at a variety of things. we know there are flex fuel vehicles out there that are not now. there is not a precise formula. >> more an aspirational goal we see this so we anticipate this use? >> well, i would say it is an optimistic goal but inform by our judgment, our understanding of the way the market has developed so far what in our judgment it can do. epa has regulated the fuel market for many many years. and this is all laid out for people to agree or disagree with
in the proposal and we welcome that. it was all those things that went into that. with, however respecting congress's clear intent that volumes of these fuels increase. and that it was going to take a push in order for that to happen. the -- our understanding is that congress meant more renewable fuel to be used than would be used without the rfs. >> i would say too that just going a little bit further, i have a diagram you can pull this up on the internet where all the e-85 pumps are located and you'll see most of them are in the upper midwest. a lot of flex fuel vehicles that are bought out there they simply don't have access to e-85 because those pumps and the infrastructure is not yet available. so i think if we had that infrastructure in place we would see e-85 use go up. so, again -- and i do want to go
back. there are challenges to cellulosic and algae as we move forward. so many other types of fuels have seen this problem in the past and fracking is a great example of that. and i support fracking. but it took many, many years for that to become cost-effective way of extracting fuel. so we have those challenges. but, again we're moving forward in iowa. many states are moving forward with cellulosic. the greenhouse gas emissions go down tremendously with that product. and i think that's a goal that everybody would like to see. thank you. >> i want to -- as long as we're talking about cars, if you look at the analysis and i think senator langford alluded to engines and we obviously have had a great deal of discussion in the ag committee, including nascar drivers who come in and swear by this as a fuel source.
so i think the jury certainly isn't back on that yet. >> or a $3 million nascar vehicle. >> but if you look at an analysis of model year 2015 warranty statements and owners manuals, i think you would see it reveals that manufacture's explicitly approved e-15 which we haven't talked about yet. e-15 is approved by epa for all 2001 and newer vehicles which accounts for about 830% of the fleet of automobiles out there. was this taken into consideration or how did you take this into consideration when you developed the rule? >> and i want to interrupt. i do want you to answer that question. i have an appropriations hearing that i'm going to have to run back and forth to a quick vote on. if you'll excuse me if senator ernst can take the chair at this point, i will return.
senator heitkamp is tough to work with, so hole your own. >> e-15 is very promising as a way to get more ethanol into the system. and there's been a lot of discussion about vehicles using it and not using it. there's relatively little getting into the system now. i think there is fewer than a hundred conversations across the country offering e-15. i think this is an issue we all need to be focused on, how we can increase people's use of this fuel. as more and more new cars come into the system and people understand and are comfortable that this is a fuel that they can use in their vehicle that those attitudes will change and price res change and the infrastructure will come. it's a challenge, senator, i
grant you. >> i think what you looked at, the charts that senator ernst just showed you, what behind with that you would see is a partnership with state governments, basically providing incentive to build out the infrastructure, doing the things that we need to do on a state based level. i am curious about how much you have heard from actual jobbers or filling stations as we called them in the old days not the major distribution centers, but those guys who are concerned about the quality of their tanks, concerned about the regulation of e-15. what's the conversation back and forth between epa and the actual convenient stores and filling stations? >> they convey to us challenges and wanting to meet the needs of their customers looking at the cost to install new infrastructure and uncertainties that they might have about new
technology and just being able to cover the cost of putting that infrastructure by being able to sell that product. >> do you think you have clear rules on what epa's requirements are for that infrastructure? >> i believe so. >> a lot of them doing think so. a lot of them think there is a level of uncertainty and as a result, i think they tend to be concerned and maybe think about overbuilding infrastructure, overbuilding their tank so that there is no concern at all later on. >> that is something that i'd be happy to take back and look into, senator. >> so we aren't just talking about blender pumps and all of those issues, the infrastructure issues and what that means, we're also talking about long-term concerns about moving to e-15. and so it would be good to figure out, you know what role epa plays in providing the certainty to our filling
stations as it relates to converting and moving into e-15, which most vehicles now basically are approved for. >> be glad to look into that. >> okay. all right. >> and with the e-15, too, the impact to our u.s. consumers, if they do have that choice and are using e-15 it is typically anywhere from a nickel to a dime lower, even than the -- than the e-10. so across the united states with then the impact to our consumers is that there is a savings of $5 billion to $7 billion a year in their own pockets. so it's something that i think we need to take a look at and continue to refine. but did you have any further -- >> yeah. >> -- questions senator? >> as long as we have some time here and the chairman -- you know, when the cat is away. when we look at i think, the
prices and it's so complicated for a lot of people to understand, but your latest proposal talks about the lack of correlation between rent prices and gas prices as well as the need to have higher ren prices to drive investment and infrastructure. however, your proposal had the opposite effect in the ren market and even d.o.e. said we won't hit 10% blends by 2016. when you guys were plotting this out and fretting, did you consider the disruption that that would have to the market and what that would mean kind of long-term? and does that inform how you want to deal with this in the future? >> so i think one statement you said that everything can agree with this is this is highly
complicated. i've been working on this for two years and i feel like i'm beginning to understand it. i'm not an economist. there is much discussion about this issue that goes on about people with that kind of training and understanding. what we tried to do was to provide more information for the public record about what we have seen in the market, but we would certainly not purport to say that -- the relationship is very complex and is affected by many many things not just the volumes that we set. >> don't you think you were a major driver? >> i wouldn't say it's not a factor, but the prices of feedstocks and the many things that go into producing fuel have a lot to do with this as well. so it's a -- it is not simple. it is complex.
we pay attention to rim prices but we -- we don't formally factor them into our decision making because it is so complex. and it is clear congress established the criticism as a way for this program to work and for obligated parties to show compliance. so it is -- it is a fact of how the program works and the -- as long as biofuels are more expensive to produce than gasoline, you know you need the system that congress set up in order to drive those volumes up make the fuels more affordable for people so that it gets into the system and it builds and then people use it. >> i guess we'll have to agree
to disagree. i think it was a major factor in what happened is in the rin market and i think we want to avoid that at least avoid people like me coming back to you and saying, you know, this disruption has created an additional disruption in the marketplace. i want to ask the chair woman move senator baldwin's statement in ford record. >> yes, without objection. >> i could go on all day. >> yes. that's the value in having renewables. it has been exciting to see the development over the course of time. and we do have to remember this is an energy area that is fairley young compared to other types of energy sources that we've had here in the united states. and we have seen support of those industries for over a hundred years. so, again, relatively young, developing source of energy as
well as clean burning, i would say, and very supportive of our economy here in iowa which is why even though it wasn't expressly written in the law that we use domestic sources of fuel, i would encourage that in the future as something that we take into consideration rather than utilizing some of these biofuels from other countries, as well so that might be something that we need to look at in the future. i think that would help increase our production, obviously, here in the united states, but pro promote the infrastructure, promote the development and for the technology enhancements. >> i just have a final comment. and it's probably not exactly on target here. but we've been talking a lot about advanced agricultural manufacturing. meaning let's use products that are renewable, let's use green products.
i don't care what other countries think about whether it's going to hurt us. it's hurting the people. >> returni voting and working through the interior appropriations, which epa has a little connection to as well. so i apologize for that back and forth. when i stepped out, the ongoing conversation was on e-15. i would have appreciated being in that dialogue as well. but i want to get a chance to follow up with you on that as
well. you and i have had this conversation already about e-15. epa believes vehicles from 2001 forward can handle e-15. manufacturers on the whole do not. if you actually go to the manufacturers in the last year year and a half, more manufacturers are allowing e-15 to be within their warranty. would you agree the vast majority of the manufacturers do not believe e-15 fulfills their warranty from 2001 to about 2013? >> i wouldn't want to characterize the number. i know that's an issue for some manufacturers. >> right. i have a chart that walks through that, that actually details each and every manufacturer and if they have any models at all that allow e-15 to be within their warranty. it's only been within the past year, year and a half that even the majority even above 50% of the manufacturers have any vehicle model at all that would
say e-15 would be tolerable on their engines. the challenge we have is increasing the e-15 really means you're increasing e-15 on new vehicles. so it's a fairly limited amount since most vehicles are older. my truck is 12 years old that i drive. that's common for most americans to have an older vehicle. so the challenge is increasing numbers of the e-85 and the assumption there that we're going to have this large increase on e-85 and there will be a jump on e-15 use when there's a limited number of locations even to get it at this point. i'm still going back to the assumptions and the pattern here. >> yeah. >> again we can talk about viability and energy usage and all that stuff, but it's a pattern of how do we discern what's coming in epa and the method of making their decision. >> we did not actually assume hardly any e-15 in these proposals for the you cite, and quite a few numbers of stations offer it currently. >> we're talking about the
biodiesel, and that has exceeded the expectations of the amount that is manufactured. i want to get a percentage or the method of your counting on the small percentage of biodiesel that cannot handle lower temperatures. we have a certain percentage out there, and i believe it's 56 degrees and down and it starts turn into a solid so that doesn't work for part of the biodiesel. the question is how did you do that estimate? the method of that? the expectations? the biodiesel is an open amount and they can set the amount from year to year, and how are you trying to split the two to say this part can be used in el paso texas and southern arizona year round, versus places that can use it year round. >> we look at these things from a national perspective and we
look at the increases in the amount of biodiesel that has been used. i think i would say, senator, and we would be glad to follow-up and confirm with you with more details with the volumes we are proposing here we are not in danger of exceeding the amount the system can absorb without getting into any sort of performance problems. >> so the assumption -- what i am trying to get at, the assumption for the specific line of product is not the line of biodiesel that has a difficult time with lower temperatures. you are assuming the growth and the information leading you to say the growth is in the area that is not the part that has a difficult time with the lower temperatures? >> i am not sure it's different fuel is it? we will follow-up with your specifics. >> there is one that uses animal products, basically, and that type of biodiesel, if you get below 56 degrees it doesn't work well, so you have to use it in warmer climates where you are
never going to get below that, which there are lots of parts of the country that do and if you head north very far you will have problems with that. when we start talking about prices according to the cbo, if it was repealed or the future mandates kept at 2014 numbers corn-based ethanol it's already in the fuel system and it's a viable fuel and consumers want to be able to purchase it and cbo estimated if the mandate wept away we will still stay at 15 billion gallons of corn-based ethanol even without the mandate, and you are pushing products in some areas the market is not requesting, i guess, at that point, and the mandate is to push it out in other areas. the challenge is of that 13
billion cbo is estimating the market really wants. is that a baseline or is that a number you all use in your estmations. is that a baseline number? >> that number, i believe, is reflective of the 10% amount that ethanol now fills in gasoline, so -- >> the blend wall location. >> the blend wall location. we don't set a standard for ethanol in the rule. ethanol fills in, because it's considered conventional biofuel. we know where the blend wall is likely to be of course depending on how much fuel is actually used, and so we take that into account and then as you reflected we understand that the intent of congress was
to push more into the system than what e 1010 accommodates on its own, and we follow that. >> when we studied it, the mandate went away on corn-based ethanol, and their study said 13 billion gallons would be continued to be used, and people like to use it and the price that consumers pay for gasoline would go down. which i thought was an interesting study to be able to look at. there's a lot of push and pull and that's not what this hearing is about and i wanted to be able to remind folks the people that do the score keeping around here reminded us corn-based ethanol works in the market regardless without the mandate and the prices would actually decrease for consumers if we remove the mandate and pull it away from us. i want to go back to something
we started talking about earlier, and that's the ozone issue. >> uh-huh. >> i know you have to balance both of these as well as many of other things. how are we balancing this in the internal conversations as to what happens to ozone levels and how ethanol increases the ozone levels and the coming standard coming. >> so the setting of the ozone standard is a health-evidence based decision that the administrator needs to make. it's about the administrator's determination about what represents a safe and healthy level of ozone in the air for people all across the country to breathe. we are not permitted by statute, and this has been confirmed by the supreme court, that decision, that health-based decision is not to be influenced by implementation issues that's dealt with in other parts of the clean air act and that has been the work of states and industry
and the epa for many years. so we do our job under the part of the clean air act that says we set the standard so the american people know what is the right level of ozone to have in the air. we then work with the states and others on assessing where across the country those levels monitored, the ozone levels, exceed that standard and that's not everywhere in the country, not by a long shot. so once you identify those areas you look to see the emissions contributing to the high ozone levels. the way ethanol can impact ozone is not uniform across the country, and it relates not just to the use of ethanol but the production of ethanol so that could be a localized situation and those may be areas where ozone levels are healthy already
and meet the standard. so it's -- it will be a situation that we will look at place by place to determine what needs to be done in order to make sure that americans have healthy air to breathe. >> we are still on the same challenge with that, and we have a mandate to use more either null and a coming mandate to decrease the ozone, and those two are going to be in competition. we are going to have cities and communities that have an increasing mandate for ethanol and then they are going to have to find ways to use more public transportation or to use -- decrease their lawn mower usage, or some will have to relocate or retrofit based on one mandate competing with another one. this is going to be an ongoing conversation where communities
are going to say you are telling us to do this, and we are going to have to do this. >> it's a question about any given area what is contributing to the high ozone levels and i don't think that it's fair to conclude senator, right now there are areas that will be significantly affected by increased knocks exclusively because of ethanol use. >> we will have locations that will be point to outside the range, and that .2 can be ethanol based. the numbers are so close in this, and if it was a big gap i would understand that, but they are not in many of the locations. it's very, very close. ethanol will be one of those contributing factors to it. so this is just going to be a lost cost issue for a lot of communities. i am trying to figure out how the epa is going to address
that. we don't have to solve it the two of us. there will be a different piece of legislation and a different committee is going to do that and i am trying to figure out the process of how that will be made because that will be different in different communities. >> i understand that and appreciate your point. the history of states and epa working together to reduce ozone levels has been to find the most cost-effective ways to reduce the precursors to ozones in areas where ozone levels are high, and that's the process that would ensue if a standard is changed. so there are lots of things that contribute to ozone nonattainment in areas that have a problem. >> would there be the possibility in the portfolio of options a community could say if
they are below .2, they -- >> we have competing mandates. i am trying to figure out the process of making that decision. if they are going to have ten things on the able, and a decreased use of ethanol in their area is not an option when we know it's a contributing factor, why couldn't that be on the table as well because now you have two competing mandates? >> i think that's a good question, senator. >> we will have to resolve that in the days ahead. i would like that to be in the set of options that a community could have to make a decision rather than have a hit on several different industrial areas when we know also the ethanol use is one of the contributing factors and at least allow them the tphreubgsability to make that decision. >> fuel use has always been an issue in considering how to meet ozone standards and the agency and the states have balanced the various requirements that congress has laid out on fuel
use against other options they have. it will be an on going conversation and i take your point. >> appreciate that. and the other issue deals with the foreign importation of some of the fuels coming in. some senators have brought it up before and it's a concern folks have to ask the question if this was about protecting the environment and american energy options was the intent and that was clear in the statute as well, the more we allow foreign implementation of the fuels, how that affects the amounts and targets, if a target is going to be set and a third of it is going to be fulfilled by foreign, should that be included? is the target number for domestically produced or all that is used? >> we understand the target is for all that is used. >> so could that be fulfilled basically with entirely foreign
based fuels? if at some point we had difficulty and we had a competitive group able to produce it overseas and bring it in, could the entire requirement be produced overseas? >> highly unlikely. >> probably unlikely yeah. you are still targeting basically doesn't matter if it's foreign or domestic just setting what we are going to use. >> what we are going to use in this country. >> that's an ongoing issue and it's something we will have to deal with in the days ahead. the clear mandate of this is really focused on american energy efficiency, i guess and the way we are able to provide our own energy independence and if we are not doing that, and simply importing it, what is the difference between importing oil or sugar cane or biodiesel products. importing is importing and we are not energy independent or working in that direction. what other comments would you have for me in the days ahead in the timeframe you have not been
able to talk about yet? >> i appreciate the opportunity to come and speak with you today and you were true to your word you provided an opportunity for all of us to have a conversation. i know that there will be a lot of discussion in the months ahead as people are getting their comments in to us. i want to assure you, again how focused we are on this program, and how much we understand and appreciate and agree with so many of the things that have been urged by the senators today in terms of administering this program the way congress intended. i will reflect again that there are a variety of views even about what the statute requires and what congress intended and i assure you we are doing our very best job, as we should, as the executive agency charged with administering this to do our best and administer the statute that we think is
appropriate and is best for the american people and to make sure that we have both ambitious and responsible efforts to implement the renewable fuel standard and that's my commitment to you. >> you know we will have a ongoing conversation about the time period and preduckability to know when people can start and what the assumptions will be, because the reset is coming and it's coming extremely quickly, so we are 2022, it's both near and far as you mentioned before, and 2017 is not far away at all, and the parameters will be set by november of 2016 so we are very close and will be in the middle of the ongoing conversation for that, and that's the one piece of this that i know we have to maintain, a very public conversation, but a very clear conversation on when the rules will be set and how to get us back on schedule, and as we are back on schedule as of november of this year, and all the rules
change for november of 2016 and i am concerned that is going to rollover as well in the days ahead. on july 16 the committee will hold a hearing on some of the issues. we thank you for your testimony and the hearing record will remain open for 15 days until 5:00 p.m. and other questions for the record. this hearing is adjourned. >> thank you.